Alternative exchange traded fund provider, ProShares, has announced the launch of the ProShares Hedge Replication ETF to provide hedge fund exposure without the challenge of hedge fund investing.
The ProShares Hedge Replication ETF's benchmark will be based on Merrill Lynch's recognized hedge fund replication model, Merrill Lynch Factor Model – Exchange Series (MLFM-ES). The fund will seek to match performance, before fees and expenses.
The MLFM-ES aims to provide the risk/return characteristics of a broad universe of hedge funds by targeting a high correlation to the HFRI Fund Weighted Composite Index, an equally weighted composite of more than 2,000 constituent hedge funds.
The fund seeks to provide the risk/return characteristics of a broad universe of hedge funds without many of the challenges of hedge fund investing. Historically, a broad universe of hedge funds, as measured by the HFRI Fund Weighted Composite Index, has had attractive risk-adjusted returns relative to equities, but issues such as illiquidity, limited transparency and high fees can deter investors, according to ProShares.
"Many portfolios could benefit from the risk/return characteristics of hedge funds, but investors often either can't or don't invest in hedge funds because of a variety of challenges," said Michael L. Sapir, Chairman and CEO of ProShare Advisors LLC, ProShares' investment advisor. "We are pleased to offer an ETF that addresses challenges of hedge fund investing and may be, for many investors, an attractive alternative to hedge funds." The ETF will list on NYSE Arca.
The fund is the third ETF in the Alpha ProShares category. Alpha ProShares are designed to provide advanced investment strategies in an ETF and represent ProShares' further expansion within the alternative ETF space.
ProShares has 121 funds and more than $26 billion in assets. ProShares is the largest provider of geared (leveraged and inverse) ETFs. ProShares is part of ProFunds Group, which was founded in 1997 and includes more than $32 billion in mutual fund and ETF assets.
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